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A new amount of lease for “forced leasing" of land

02.08.2017

On June 1, 2017, the Saeima of the Republic of Latvia adopted amendments to the law "On Privatisation of State and Local Government Residential Houses" according to which new amounts of lease for the so-called "forced leasing" of land under residential buildings are being established.

We would like to remind that the conclusion of the land lease agreement is a mutual responsibility of the owner of the land and the owner of the privatized apartment. The lease agreement must be concluded on the use of the land plot that the privatization commission determined as being functionally necessary for the residential building.

Until now, the norm has been in effect, according to which the lease was established by agreement of the parties, and if the parties could not agree, the lease for the owner of the privatized apartment was set at 6% per year from the cadastral value of the land. Henceforth, if the parties cannot agree, the lease for the owner of the privatized apartment from 01/01/2018 is set to 5% per year from the cadastral value of the land, from 01/01/2019 - up to 4% per year from the cadastral value of the land, and from 01.01.2020. - up to 3% per year from the cadastral value of the land.

Similar amendments were made to the law “On Land Reform in the cities of the Republic of Latvia”.

These amendments affect the owners of privatized apartments in those houses that are completely or partially built on private (master) land. In fact, these amendments are aimed at reducing the financial burden of owners of privatized apartments, which are forced to pay lease to landowners.

In practice, this means that the owners of privatized apartments or the manager of an apartment building from 01/01/2018 has the right to demand from landowners to make changes to the existing land lease agreements.

In the event that landowners refuse to amend the existing lease agreements, so that the amount of lease can be voluntarily brought into line with the current rules of law, the owners of privatized apartments or the manager of an apartment building has the right to apply to the court for a change in lease. According to the general principles of civil law, the terms of the agreement that are contrary to the requirements of the law cannot be considered mandatory and are invalid.

Considering that court proceedings are a rather lengthy process, it is already possible to begin revising the lease payment terms for 2018. Most likely, landowners will not want to lose their rental income and will resist the changes, and therefore the only solution will be to file a suit with the court.

/ The Head of the Judicial Department of the Law Office INLAT PLUS Dmitrijs Sustovs /